Simple dummy variable model:

Let us now consider  the following model as an example of the ANCOVA model  

Model is similar to except that it contains a quantitative variable (years of teaching) in addition to the qualitative variable (gender of the teacher) which has two categories  namely,  male and  female. Thus  the  model  has two explanatory variables one qualitative  and one quantitative.

What does model meanlimply? Assuming, as usual, E(u_i) = 0,  we see  that the mean  salary of a female school teacher is

and the mean salary of male school teacher is

From  the model  (10.5) we  see that the male  and  female school  teachers'  salary function in relation to the years of experience have  the same slope (y)  but different intercepts. In other words, in the model, it is assumed that the level of mean salary of male  school teacher is different from that of his'female counterpart but  the rate of change in the mean salary by years of experience (represented by  the slope  term y)  is same  for both male and  female  school  teachers. Geometrically we  can  represent models 6 as shown  in  Fig.  (in  the figure a is assumed  to  be greater than zero, i.e., a >  0).

Just as  in  regression here also one can use the t-test to test for the hypothesis that male and female school teachers have the same mean annual salary.